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Analysts fear government will accumulate more debt for African countries
Kampala, Uganda | RONALD MUSOKE | Africa may continue to run deeper into debt if China realizes its plans to sell the continent's debt to investors from next year, observers fear.
Hong Kong Mortgage Loan Company (HKMC), a major Chinese banking conglomerate, is reported to be in talks with the Chinese government for the purchase and repackaging of an assortment of African infrastructure debts. in securities, which will then be sold to investors.
Apparently, the measure aims to "allow the Chinese government to generate more money than it can lend to finance more infrastructure projects on the continent."
The agreement, still in the process of being formulated, could bring together more than 90 companies, including developers or project operators, commercial and investment banks, including Hong Kong, mainland China and overseas. associating to buy Africa's infrastructure debt.
"This initiative is expected to help recapitalize commercial banks' capital in other Greenfield infrastructure projects, in addition to enabling broader financial market participation in infrastructure development under the initiative." Road and Belt, "said Helen Wong, Executive Director of HKMC Greater China recently.
"I am pleased that the HKMC is now considering creating a new sector for the purchase of infrastructure loans for securitization purposes," Wong said, "because the new capital standards for banks do not encourage banks to keep their loans. in the long run, even if projects at the stage of creation of contaminated land are running smoothly. "
But observers of China-Africa engagement said that, if for Chinese financiers, this development offers several opportunities to earn more money on the continent, this approach could also prove to be a "Poisoned chalice" to the extent that it could increase the indebtedness of African countries.
Over the last decade, China has become the largest bilateral infrastructure donor in Africa, surpassing the African Development Bank (AfDB), the European Commission, the European Investment Bank, the International Finance Corporation, World Bank and the G8 countries together.
Fantastic highway news and suspension bridges, huge hydroelectric dams and even new cities born in countries like Senegal and Angola are no longer rare today, thanks to loans without hassle of Beijing.
Choking of Chinese debt
There is no official Chinese data on loans to African countries but, according to the latest data from the Johns Hopkins University's China-Africa Research Initiative, which collects, cleans and analyzes data on African loans since 2007, the Chinese government, banks and sub-contractors US $ 143 billion in loans to African governments during the period. Angola tops the list with 42.8 billion US dollars.
The countries of East Africa are not far behind. They say that they owe China a combined total of 29.42 billion US dollars in April 2018, in the form of infrastructure loans. Ethiopia is the debt of the capital with 13.73 billion US dollars, followed by Kenya with 9.8 billion US dollars, while Uganda owes 2.96 billion US dollars and the Tanzania. ($ 2.34 billion). Rwanda, Burundi and South Sudan owe $ 289 million, $ 99 million and $ 182 million respectively.
The Johns Hopkins University research project indicates that Ethiopia has invested the majority of its funding in the transportation sector (US $ 4.37 billion), which has been used both for Addis Ababa light rail and the Addis-Djibouti railway, 700 km long. US $ 3.16 billion and power projects worth US $ 2.54 billion, while nearly US $ 2.02 billion was dedicated to launching its special industrial zones.
In addition, the Kenyan government has contracted a US $ 597 million loan for energy projects, including US $ 135 million for the 55 MW solar power plant in the northern city of Garissa. While South Sudan has received $ 158 million for its transport sector to date, and an additional $ 24 million for its energy projects.
The Ugandan energy sector, on the other hand, received the largest funding in Beijing, US $ 1.92 billion, while its transport sector absorbed US $ 762 million. The China Import-Export Bank has financed the $ 1.4 billion Karuma, as well as an additional $ 483 million for Isimba, two hydroelectric dams on the Nile, currently under construction. .
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